Diminished Philosophy

Andrew Taylor posted a really provocative piece last week about whether or not the nonprofit industry is “overbuilt”.

His piece really got me thinking.  Actually, it made me furious at first, but after a few minutes I started into the thinking part.  I wasn’t upset with Andrew; I thought he wrote a great piece that should cause any reasonably level headed individual with at least two active brain cells to think about.

My mind instantly narrowed the general concept of “nonprofit” down to only thinking about the orchestra industry.  But before I go into too much depth here, let’s establish a frame of reference.

What do we mean by “overbuilt”?  Andrew summed it up best with this quote from Adrian Ellis,

There is a structural imbalance between the number and scale of non-profit cultural organizations that there is the available cash to support and the number and scale of organizations that exist. Because the sector is, for compelling reasons, protected from the full force of the market, supply and demand are not brought into balance in the same way as in a free market. The adjustments back to some sort of equilibrium between supply and demand are slower, more awkward and more politicized than in a situation where there is a market in capital resources. The non-profit cultural market can sustain prolonged periods of adjustment in which relatively inefficient and, perhaps more important, artistically questionable organizations continue to absorb resources that might be better deployed elsewhere in the sector, despite their inability to serve their missions effectively.

Let’s examine some of those notions.

1. Because the sector is, for compelling reasons, protected from the full force of the market, supply and demand are not brought into balance in the same way as in a free market.

I am thoroughly tired of hearing that nonprofits, orchestras in particular, are “protected” from market forces like the rest of the free world.  Nonsense!  Arts organizations have to sell tickets and create a public interest in their product just the same way any for profit business would.

I see you there, scratching your head and thinking to yourself “but what about all those grants orchestras receive?”

A better question to ask is “what about all of those government subsidies that for profit businesses and individuals receive?”  How much would it come to if we added up all of those subsidies the federal government hands out to peanut farmers, wool producers, drug companies, oil companies, software designers, car manufactures, etc.?  But wait, there’s more; don’t forget to add on all of the corporate tax breaks and tariff protection those same businesses receive.   I bet if you compare that sum to the amount of money the government gives to the nonprofit industry you’ll see the former eclipsing the latter.

Even today, I watched two national news segments about the flu vaccine shortage and how there are already senators and representatives pushing to create legislation which will guarantee to pay pharmaceutical companies for any oversupply of flu vaccine they produce because otherwise they won’t make a profit.

How is that not protection from “market forces” (and guess how much “extra” vaccine will get produced if that legislation becomes law)?  I don’t see any government organization buying unsold tickets to concerts an orchestra was unable to sell (and why there are so many unsold tickets is a different conversation all to itself).

Accordingly, this entire notion is just pure bull shit.  The only difference between government money directed toward arts organizations and money directed toward for profit industries is how it’s recorded by the treasure department.  In one column they call it a “grant” and the other column they call it a “subsidy”.

2. The adjustments back to some sort of equilibrium between supply and demand are slower, more awkward and more politicized than in a situation where there is a market in capital resources.

Equilibrium?  How does one conclude what equilibrium is?  Right now only 4% of Americans actively participate in classical music.  That figure is so low because the orchestra industry has repeatedly shot themselves in the foot; it’s completely self inflicted.

Supply and demand forces haven’t conspired to reduce classical music to a cultural footnote.  This point assumes that there is some sort of “equilibrium” waiting to happen, but it’s being prevented by “sinister forces” (at least it’s good to see those guys from the Nixon administration can still find work).

And what does this statement suggest to you, that the 4% active participation figure is artificially higher than it should be?  Well at least more than a few marketing directors will sleep better at night knowing that their declining attendance figures are, in actuality, pretty damned high.

It seems to me that the point seems to have glossed over the fact that the  very same “sinister market forces” which don’t effect the non profit world seemed to have had no trouble rolling over several orchestras the past two years; as a matter of fact, it laid them out hard enough that they went out of business.  I suppose bad management had nothing to do with that in the least, instead, it was just the industry introducing some sort of “self correcting” mechanism.

3. The non-profit cultural market can sustain prolonged periods of adjustment in which relatively inefficient and, perhaps more important, artistically questionable organizations continue to absorb resources that might be better deployed elsewhere in the sector, despite their inability to serve their missions effectively.

Here’s where we find the only thing I remotely agree with.  Orchestra administrations are slow to change and they do employ inefficient practices.  But that’s not because they enjoy some sort of magical “protection” status (that phrase sounds like orchestras have been declared a federally protected “wetland” or something).  It’s because they have too many bad managers which insist on using an old 19th century model of governance and operational structure.

I would also love to know what questionable artistic organizations are.  However, I would have to say it would be a great gig if I could become the guy who gets to decide (maybe you get a cool looking long silk robe with the job).  And how do you decide if funds are better deployed elsewhere?

As far fetched as the concept of “supreme arts judge” is, there are actually examples of organizations that are doing exactly that.  But you’ll have to wait to read about that topic, I’m still working on it for an upcoming article.

Here’s what it all boils down to

This bad concept has been steadily working itself into the orchestra industry for a long time, but with the current round of difficult times it’s really picked up some steam.  Right now, some orchestra managers like to use the buzz words “structural deficits”; that odious concept which purports there is a fixed sum of money and appeal in each community and orchestra budgets should be tailored to that formula.

That argument is nothing more than the latest attempt for some managers and board members to stop working as hard as they should.  I wrote about that in detail back in August with a piece called Loss Of Momentum.

Audiences are declining, CD sales are slumping, and the industry has been steady sliding out of the cultural consciousness.  Yet I still receive email from some orchestra managers and music critics accusing me of being a dooms-day prophet because I point these things out.  But I’m not the one suggesting that this decline is a result of the industry being overbuilt, I’m not the one with the diminished philosophy that classical music is currently “too big” to support.

Instead, I’m the optimist.  I don’t accept the false notion of structural deficits, lack of music in public education, or any other cock-and-bull comparison to supply and demand that some people like to trot out as the root of the evils that are plaguing this industry.

I believe this industry can be fixed; not just for the here and now, but for the long term.  Orchestral classical music has no where to go but up, so why on earth would anyone suggest that it needs to go the other way?

About Drew McManus

"I hear that every time you show up to work with an orchestra, people get fired." Those were the first words out of an executive's mouth after her board chair introduced us. That executive is now a dear colleague and friend but the day that consulting contract began with her orchestra, she was convinced I was a hatchet-man brought in by the board to clean house.

I understand where the trepidation comes from as a great deal of my consulting and technology provider work for arts organizations involves due diligence, separating fact from fiction, interpreting spin, as well as performance review and oversight. So yes, sometimes that work results in one or two individuals "aggressively embracing career change" but far more often than not, it reinforces and clarifies exactly what works and why.

In short, it doesn't matter if you know where all the bodies are buried if you can't keep your own clients out of the ground, and I'm fortunate enough to say that for more than 15 years, I've done exactly that for groups of all budget size from Qatar to Kathmandu.

For fun, I write a daily blog about the orchestra business, provide a platform for arts insiders to speak their mind, keep track of what people in this business get paid, help write a satirical cartoon about orchestra life, hack the arts, and love a good coffee drink.

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